EXPRESS: Two-Stage Newsvendor Network Problem: A Data-Driven Distributionally Robust Optimization Approach
We consider a multilocation newsvendor network in which historical data are the only available information about the joint demand distribution. To determine optimal inventory levels, we develop a novel data-driven two-stage distributionally robust optimization (DRO) model that does not assume the demand support is known. Instead, we infer the support from historical data using two prediction algorithms, which yield quantile-based and Mahalanobis-distance-based support estimates and therefore either ignore or capture cross-location demand dependence. Our objective is to minimize worst-case expected cost over an ambiguity set constructed from these support estimates, consisting of all probability distributions within a prescribed type-∞ Wasserstein (W ∞ ) distance of the empirical distribution. To approximate the second-stage recourse decisions, we employ a multiple-linear-decision-rule (MLDR) approximation that is provably asymptotically optimal. This leads to tractable linear programming (LP) and second-order cone programming (SOCP) reformulations for the quantile-based and Mahalanobis-distance-based formulations, respectively. We also establish support-aware finite-sample guarantees for the proposed framework. Numerical results show that quantile-based support estimation is more effective at maintaining reliable service levels, whereas Mahalanobis-distance-based support estimation yields larger cost reductions, particularly under correlated demand.
Authors
- Lianmin Zhang (ORCID: https://orcid.org/0000-0002-8626-1847)
- Daoheng Zhang
- Hasan Hüseyin Turan (ORCID: https://orcid.org/0000-0003-1147-2436)
- Daryl Essam
- Shan Dai
- Ruhul Sarker
Publication Details
- Journal
- Production and Operations Management
- Published
- 2026-07-02
- DOI
- https://doi.org/10.1177/10591478261469015
- Primary Topic
- Supply Chain and Inventory Management
- Type
- article
- Field-Weighted Citation Impact
- 0.00